Interim Results

Spirax-Sarco Engineering PLC
6 September 2001

Spirax-Sarco Engineering plc

6th September 2001

2001 Interim Results
                                                         Six months to 30th June
                                                           2001     2000 Change

Turnover                                                £145.6m  £133.5m    +9%
Operating profit                                         £19.9m   £19.2m    +4%
Operating profit margin                                   13.7%    14.4%
Profit before taxation and before the profit on          £18.4m   £18.2m    +1%
disposal of fixed assets
Earnings per share before the profit on disposal of       16.6p    16.0p    +4%
fixed assets
Dividend per share                                         5.6p     5.4p    +4%

  * Organic sales up 5%
  * Growth broadly based
  * Difficult trading in Latin America
  * Signs of reducing momentum in Asia
  * EPS and Dividends up 4%

Commenting on the results, the Chairman, Tim Fortune, said:

'I am pleased to report further progress during the first half of 2001,
despite the less stable state of a number of the world's economies.....
Our technical selling and support philosophy, which brings considerable added
value to our customers, underpins long term growth in sales. Sales have
continued to be positive since June although the weakness in Asia and Latin
America has continued. While we expect to make further progress in the second
half of 2001, the economic environment in which we are operating is becoming
increasingly difficult to predict.'

Enquiries:

Tim Fortune      -     Chairman

Marcus Steel     -     Chief Executive

David Meredith   -     Director-Finance

Tel: [phone] at Citigate Dewe Rogerson until 6.00 p.m.

The Chairman, Tim Fortune, comments as follows:

'I am pleased to report further progress during the first half of 2001,
despite the less stable state of a number of the world's economies. We
achieved growth in our sales and profits by building on the strengths of our
global coverage, unique technical knowledge and support for our focused
industrial and commercial steam and peristaltic pumping markets. The overall
effect of exchange rate movements was relatively small, with a strengthening
of the US dollar and, to a smaller extent, the euro, partially offset by the
weakness of some Asian currencies (notably the Korean Won) and the Brazilian
Real.

Sales in the first half year were £146 million compared with £133 million in
the first half of 2000, an increase of 9%, reflecting growth in most markets
but lower sales in Latin America. Exchange rate movements added 2% to
turnover. M&M, the small Italian based manufacturer of solenoid and piston
actuated valves, which was acquired in October 2000, also added 2% to Group
sales. Organic growth, excluding acquisitions and exchange movements, was 5%.

Operating profit was £19.9 million in the first half, an increase of 4% on
2000. The operating profit margin was reduced from 14.4% in 2000 to 13.7% in
2001 due largely to the weak market in Mexico, excluding which, the Group's
operating profit would have been up 8%. The charge for amortisation of
goodwill was £0.3 million (2000: £0.2 million). During the first half of 2001
a non-operating profit of £0.6 million was realised on disposal of fixed
assets. The first half of 2000 included a £0.9m non-operating loss on disposal
of fixed assets.

Net interest payable for the first half was £1.5 million, an increase of £0.5
million on the same period in 2000, mainly due to the higher borrowings
arising from the share buy-back programme and the acquisition of M&M. Profit
before tax and before the non-operating item was £18.4 million (2000: £18.2
million), and after the non-operating item was £19.0 million (2000: £17.3
million). The tax charge was 31% (2000: 32%). The profit attributable to
minority interests fell by £0.2 million. Earnings per share before the
non-operating item were 16.6p, which compares with 16.0p in 2000, an increase
of 4%. After the non-operating item, earnings per share were 17.5p (2000:
15.1p).

TRADING

The Spirax Sarco and Watson-Marlow Bredel businesses are the world leaders in
providing knowledge, service and products in their respective industrial steam
and peristaltic pumping markets. Our specialist knowledge is available
globally and is aimed specifically at helping to improve customers'
performance in energy conservation and process efficiency.

During the half year, the trading environment in the UK became steadily more
difficult, with the manufacturing sector under increasing pressure. However,
our sales companies performed creditably, increasing both sales and profits.
The factories remained busy, but there were signs of reducing demand from Asia
and the Americas in the second quarter. Further investments in sales
development and IT initiatives were undertaken in 2001 which will benefit the
long term growth of the Group.

In Continental Europe as a whole, we grew sales and profits including last
year's acquisition of M&M and small exchange rate gains. In Belgium, Germany,
Scandinavia, Spain and Switzerland, our sales operations made good gains in
sales and profits. Against this, our companies in Italy and Portugal found
conditions testing, where results and margins were lower. By contrast, in
Eastern Europe, our companies increased margins within economies that are
still depressed. The factory in France saw continuing good demand, but the
Bredel factory in Holland encountered lower demand from the USA.

The economic conditions in the Americas were generally weak, with Argentina
and Mexico stuck in recession but the strong US dollar generated exchange rate
gains. Overall, our companies managed to increase sales but profits were
unchanged due to a severe drop in Mexico where the steep fall in activity in
the second half of 2000 continued in 2001 and led to a significant drop in
sales and profit margin; steps to counter the situation were taken. In the
USA, although industrial confidence declined, our companies grew sales and
overall profits moved ahead well. The Spirax operation in South Carolina, in
particular, continued to improve sales and profits.

International operations outside Europe and the Americas, started the year
strongly but there was a definite slow-down in growth in the second quarter
due to the increasing caution of Asian manufacturers in the light of weaker
economies in Japan and the USA. However, for the first half, most of our Asian
companies grew their sales, although prices were restrained in the difficult
economic conditions and some local currencies, including the Korean Won, have
been weak this year. Our Japanese company made progress and our Chinese
operation continued its strong growth in sales and profits. The Australian and
New Zealand sales companies experienced tough market conditions and sales and
profits were down. Overall, profits in the region were unchanged from the
first half of 2000.

BALANCE SHEET & CASH FLOW

Capital employed (net assets excluding goodwill and net debt) increased during
the first half reflecting the general increase in business levels and a
reduction in creditors. The cash inflow from operating activities was £20.0
million (2000: £21.3 million) and net capital expenditure rose to £6.9 million
from £6.1 million as we continued to invest in improved manufacturing
efficiency. Net debt increased to £48.0 million from £45.6 million at the end
of last year. Net gearing at 33% was marginally lower than at the start of the
year.

DIVIDEND

The directors have declared an interim dividend for 2001 of 5.6p (2000: 5.4p)
per ordinary share, an increase of 4% which will be paid on 9th November 2001
to shareholders on the register at the close of business on 12th October 2001.
No scrip alternative to the cash dividend is being offered in respect of the
2001 interim dividend.

PROSPECTS

Our technical selling and support philosophy, which brings considerable added
value to our customers, underpins long term growth in sales. Sales have
continued to be positive since June although the weakness in Asia and Latin
America has continued. While we expect to make further progress in the second
half of 2001, the economic environment in which we are operating is becoming
increasingly difficult to predict.'



GROUP PROFIT AND LOSS ACCOUNT


                                     Six months Six months           Year ended
                                        to 30th    to 30th        31st December
                                           June       June                 2000
                                           2001       2000                £'000
                                          £'000      £'000

Turnover                                145,592    133,486              278,148

Operating profit                         19,876     19,183               43,370
Profit /(loss) on disposal of fixed         616      (926)                (990)
assets

Profit before interest                   20,492     18,257               42,380
Net interest payable                    (1,487)      (961)              (2,213)

Profit before taxation                   19,005     17,296               40,167
Taxation (note 3)                       (5,872)    (5,498)             (12,867)

Profit after taxation                    13,133     11,798               27,300
Minority interests - equity               (269)      (494)                (933)

Attributable profit                      12,864     11,304               26,367
Dividends                               (4,138)    (4,028)             (13,301)

Retained profit                           8,726      7,276               13,066

Earnings per share (note 4)
     before the non-operating item        16.6p      16.0p                37.4p
     after the non-operating item         17.5p      15.1p                35.4p

Dividends per share                        5.6p       5.4p                18.0p



GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

                                               Six        Six        Year ended
                                            months     months     31st December
                                                to         to    
                                         30th June  30th June              2000
                                              2001       2000    
                                             £'000      £'000             £'000

Profit for the period                       12,864     11,304            26,367

Currency translation difference on             568      2,976             1,049
foreign currency net investments

Total recognised gains and losses           13,432     14,280            27,416
relating to the period

GROUP BALANCE SHEET
                                                      
                                                      
                                     30th  June  30th June        31st December
                                           2001       2000                 2000
                                          £'000      £'000                £'000
Fixed assets
Intangible assets                         9,146      6,273                9,299
Tangible assets                          91,141     85,367               89,114
                                        100,287     91,640               98,413

Current assets
Stocks                                   68,234     61,527               64,166
Debtors                                  87,035     82,668               88,768
Cash deposits and short term             22,996     16,770               18,111
investments
Cash at bank and in hand                  3,298      3,785                2,961
                                        181,563    164,750              174,006

Creditors
Amounts falling due within one         (79,682)   (69,036)             (81,204)
year

Net current assets                      101,881     95,714               92,802

Total assets less current               202,168    187,354              191,215
liabilities

Creditors
Amounts falling due after more         (42,084)   (38,439)             (42,060)
than one year

Provisions for liabilities and         (11,069)   (11,245)             (10,891)
charges

Net assets                              149,015    137,670              138,264

Capital and reserves
Called up share capital                  18,472     18,648               18,398
Share premium account                    33,208     32,096               32,097
Revaluation reserve                       4,492      4,645                4,653
Capital redemption reserve                1,832      1,582                1,832
Profit and loss account                  87,400     77,528               77,944

Shareholders' funds - equity            145,404    134,499              134,924
Minority interests - equity               3,611      3,171                3,340
                                        149,015    137,670              138,264



GROUP CASH FLOW STATEMENT
                                            Six         Six          Year ended
                                         months      months        31stDecember
                                             to          to                2000
                                      30th June   30th June
                                           2001        2000                     
                                          £'000       £'000               £'000

                                          
Operating profit                         19,876      19,183              43,370
Depreciation charges                      5,985       5,562              11,216
Increase in stocks                      (3,860)     (1,787)             (4,220)
Decrease in debtors                       1,311     (1,821)            (10,046)
Decrease in creditors and provisions    (3,274)         124               3,073

Cash flow from operating activities      20,038      21,261              43,393
Net interest paid                       (1,443)       (853)             (2,129)
Dividends paid by subsidiary              (304)       (419)               (749)
undertakings
to minority interests

Taxation                                (5,984)     (5,877)            (11,993)
Purchase of tangible fixed assets       (8,350)     (9,343)            (16,151)
Sales of tangible fixed assets            1,451       3,226               5,903
Acquisitions                                  -     (1,852)             (7,408)
Equity dividends paid                   (9,273)     (9,076)            (13,104)

Cash outflow before use of liquid       (3,865)     (2,933)             (2,238)
resources and financing

Management of liquid resources          (5,113)       6,423               4,877
                                        (8,978)       3,490               2,639

Financing -
     Issue of ordinary share capital      1,186         897                 897
     Share buy-back                           -     (2,478)             (5,851)
     Increase in debt                     8,112         296               1,840
                                          9,298     (1,285)             (3,114)

Increase/(decrease) in cash in the          320       2,205               (475)
period

RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET DEBT

Increase/(decrease) in cash in the          320       2,205               (475)
period

Cash inflow from increase in debt       (8,112)       (296)             (1,840)

Cash outflow from increase in liquid      5,113     (6,423)             (4,877)
resources

Change in net debt resulting from       (2,679)     (4,514)             (7,192)
cash flows
Amortisation of loan expenses              (13)        (12)                (25)
Finance leases                                -           -               (732)
Finance lease acquired with                   -           -               (619)
subsidiary
Translation difference                      293     (2,855)             (2,237)
Movement in net debt in the period      (2,399)     (7,381)            (10,805)
Opening net debt                       (45,608)    (34,803)            (34,803)
Closing net debt                       (48,007)    (42,184)            (45,608)

Notes


        1. Overseas results and cash flows have been translated into sterling
        at average rates of exchange for each period. Foreign currency assets
        and liabilities have been translated at period end rates.

        2. In accordance with Financial Reporting Standard 10, purchased
        goodwill arising on consolidation in respect of acquisitions since 1st
        January 1999 has been capitalised and is being amortised over 20
        years.

        3.Taxation has been estimated at the rate expected to be incurred in
        the full year.

                                        Six           Six            Year ended
                                     months        months         31st December
                               to 30th June  to 30th June                  2000
                                       2001          2000
                                      £'000         £'000                  £000

United Kingdom corporation            1,162         1,245                 3,258
tax
Overseas taxation                     4,690         4,470                 8,246
Deferred taxation                         2            20                 1,108
Adjustment in respect of                 18            41                 (233)
previous years
                                      5,872         5,776                12,379
Tax on non-operating item                 -         (278)                   488
                                      5,872         5,498                12,867


        4. The calculation of earnings per share before the non-operating item
        is based on earnings of £12,248,000 (2000: £11,952,000) and the
        calculation of earnings per share after the non-operating item is
        based on earnings of £12,864,000 (2000: £11,304,000) together with the
        weighted average number of shares in issue during the half year of
        73,691,340 (2000: 74,913,269).

        5. Capital employed is represented by net assets excluding goodwill
        and net debt.

        6. This financial information, which is unaudited, does not amount to
        full accounts within the meaning of Section 240 of the Companies Act
        1985 (as amended). Full accounts for 2000 with an unqualified audit
        report have been filed with the Registrar of Companies.

        7. Copies of the Interim Report will be sent on 7th September 2001 to
        members and can be obtained from our registered office at Charlton
        House, Cirencester Road, Cheltenham, Gloucestershire GL53 8ER. From
        10th September 2001 the Interim Report will be available on our
        website at www.SpiraxSarcoEngineering.com.